New insurance guidelines

For starters, new traditional products will have a higher death cover

Product guidelines for linked and non-linked life insurance products that have been revised by the Insurance Regulatory and Development Authority will be implemented from Wednesday. Here is an overview of the changes that will kick-in from January 1, 2014:

• NEW TRADITIONAL PRODUCTS WILL HAVE A HIGHER DEATH COVER. For regular premium policies, the cover will be 10 times the annualised premium paid for those below 45 years and seven times for others. The minimum death benefit in case of a traditional plan is at least the amount of the sum assured and the additional benefits
   
• IN THE CASE OF UNIT-LINKED PRODUCTS (ULIPS), insurers will have to intimate customers about changes in the yield of the Ulip every month. Variable insurance plans will guarantee a certain minimum rate of return at the beginning of the policy, though they are linked to an index
  

 

THESE VARIABLE INSURANCE PRODUCTS will be treated on a par with Ulips, those products will follow the same commission package for Ulips
 

AGENTS WHO TEND TO SELL SHORTER TENURE PRODUCTS will now have to shift their sales strategy to longer tenure products, since commissions have now been linked to tenure of a policy. Higher the duration, higher is the commission. Hence, your agent will push for a product with tenure of 20 years and more
 

THERE WILL BE A CHANGE IN SURRENDER VALUE FOR POLICY holders. This is the cash component that a policyholder gets when he/she surrenders a policy. The surrender value will  depend on the premium paying term of the policy. If the premium paying term for policy is less than 10 yrs, then the policy will acquire the surrender value after paying premium for 2 years (Compared to three years). If tenure is more than 10 years, the surrender value will be acquired only after paying premium for three years

 

THE MINIMUM SURRENDER VALUE NOW IS 30% OF ALL THE PREMIUMS paid without excluding the first year premium. Earlier, first year premium was excluded. Between the fourth and seventh year, the surrender value will be 50% of all premiums paid
 

ALL ASSET-VALUE RELATED CALCULATIONS & DETAILS OF THE RETURNS, in case of linked products, will now be clearly put on the policy form. While some of it could be illustrative in nature, the product will be more transparent since the customer will have a clear idea of the product and its returns